a conceptual framework for supply chain_ an application to agri-food chains in chinagovernance

8/10/2019 A Conceptual Framework for Supply Chain_ an Application to Agri-food Chains in Chinagovernance

1/19

A conceptual framework forsupply chain governance

An application to agri-food chains in China

Xiaoyong Zhang and Lusine H. AramyanLEI, Wageningen University and Research Centre, The Hague, The Netherlands

Abstract

Purpose Chinese agri-food chains consist of the millions of small scale farmers, who are not wellstructured and organized in the supply chain. Owing to market liberalization and globalization, one ofthe most challenging issues along agri-food chains in China is becoming the issue of how to link thesesmall-scale farmers into the modern chains. Consequently, it is essential for both policy makers andprivate sectors to understand the governance structure in agri-food supply chains. Therefore, the

purpose of this paper is to develop a theoretical framework for supply chain governance, including itsantecedents and consequences, as well as a series of hypotheses for empirical testing.

Design/methodology/approach A conceptual framework of chain governance is proposed in thisstudy, where governance structure consists of two dimensions: contractual governance and relationalgovernance. The study intends to propose a complementaryrelationship between contracts and relationalaspects, such as trust, in the Chinese context. Future research is needed to empirically test this model.

Findings The proposed conceptual model is unique, since the majority of the articles addressingthis topic focuses on contract farming while limited research touches upon the issues of trust andrelations. However, a combination of both contracting and relationships are seldom addressed.

Originality/value This paper evaluates a novel concept of two dimensional governance structure inthe agri-food supply chain, where transaction cost economics theory and relational theory are combinedto study the governance relationships between small scale producers in China and their buyers.

KeywordsChina, Agriculture, Farms, Supply chain management

Paper type Research paper

IntroductionTrade liberalization around the world has resulted in the integration of agriculturalsupply chains in the global markets. This development allows the linkage of traditionalagricultural productions with modern, niche markets, such as export markets ordomestic supermarkets. One of the institutional innovations during the process is theso-called contract farming (CF). Key and Runsten (1999) view the formation of suchnew institutions as a response to imperfections in markets such as credit, insurance,information, production factors, etc. CF has been widely applied in the Africainternational agro-chains and its major impacts and challenges are often discussed inthe Africa context as well (Warning and Key, 2002; Glover, 1987; Porter andPhillips-Howard, 1997).

A central debate during agricultural industrialization is whether small scale farmersfrom developing countries have been excluded from the process. Studies from Africa and

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1756-137X.htm

JEL classification Q12, D21, O13The authors would like to thank the EU 6th research framework project Chinese Agricultural

Transition: Trade, Social and Environmental Impacts (Contract No. 44255) for financial support.

CAER1,2

136

China Agricultural Economic Review

Vol. 1 No. 2, 2009

pp. 136-154

q Emerald Group Publishing Limited

1756-137X

DOI 10.1108/17561370910927408


2/19

Latin America suggested mixed results, ranging from the positive impacts of anagribusiness for development model (Williams and Karen, 1985; Warning and Key,2002) to probably only rich, large farmers benefitting from the emerging of supermarkets(Hernandezet al., 2007; Weatherspoon and Reardon, 2003; Reardon and Barrett, 2000).

The supply chain in China is experiencing much more rapid revolution than anywherein the world (Hu et al., 2004). In their studies on the impacts of these changes on farmers inChina, Huang etal. (2007a, b) conclude that both small and large farmers and rich and poorones have equal opportunities to participate in modern marketing channels in China.Furthermore, farmers do receive much higher prices for their products from the modernmarketing channels. They attribute theirresults to the characteristics in China,such as theequitable distribution of land among farmers limited theemerging of large farmers,as wellas high competition in the domestic markets.

The agribusiness supply chain may involve various actors and cover long stagesfrom input suppliers to final consumers. Chinese agri-food chains consist of themillions of small scale farmers (suppliers), which are not well structured and organized

in the supply chain. Not long ago the whole agri-food supply chain in China wasoperated under governmental planning, where every investment in new marketoutlets was provided by government. Over the three decades of market liberalization,it has been suggested that the most challenging part along these agri-food chains inChina is how to link these small holders into the modern chains. Therefore, it isparamount that both policy makers and the private sector understand the status of thechain governance and its antecedents and consequences.

Most chain governance studies focus mainly on the transactional aspects of therelationships between farmers on the one hand and modern agribusiness on the other

hand. Within the framework of transaction cost economics (TCE), the supplier-buyerrelationships should structure itself in such a way to minimize the transaction costs(Williamson, 1975, 1993a, b). However, TCE has been criticized for its simplicity since itignores the informal, socially embedded relationships in producing stable contractconditions (Demsetz, 1988; Ring and van den Ven, 1992, 1994). Nevertheless, the socialrelationships, such as network and trust, are such important concepts in Asian culturethat they should not be excluded in our China study in analyzing relationship exchanges.

In this paper, we seek to combine both TCE theory and relational theory to studythe supply chain governance between small scale producers in China and their buyers.We propose that the governance relationships consist of two dimensions: contractualgovernance and relational governance. The traditional contractual governancerepresents the hard, explicit and formal side of the relationships. By including therelational exchange aspects in this study, we look at the soft, normative and informalside of the relationships between farmers and their buyers as well. The study intends

to clarify the relationships between contracts and relational aspects, such as trust, inthe Chinese context. The results would provide evidence-based support to strategicpolicy making for both governments and private sectors. If the results indicate acomplementary relationship between contracts and trust, policy makers and theprivate sector should combine resources and efforts to reach farmers from both aformal, legal perspective as well as through social relational networks. If the two

concepts are substituting for one and the other, it is recommended to concentrate theresources on either formal or informal relationships.

Supply chaingovernance

137


3/19

The overall goal of this study is to develop a theoretical framework for supply chaingovernance, including its antecedents and consequences. In other words, how farmersare linked in the chain, why they are linked in certain ways, what are the externalinfluencing factors for their choices and what are the consequences of their choices?

Specifically, this research aims to examine the following set of questions:. Can supply chain governance be conceptualized from both contractual as well as

relational aspects? If so, is the relationship between contractual governance andrelational governance one of substitution or complementary? The hypothesis isthat they are complementary in the Chinese context.

. Will external environments impact on the choice of supply chain governance?If so, in what kind of relationships? Will higher environmental uncertaintyencourage closer cooperation between small scale producers and their buyers?

. What are the relationships between chain governance and transaction specificinvestment (TSI)? Will a more closed governance relationship induce more TSIfrom the farmers?

. How does the two dimensional (contractual and relational) governancemechanism affect the final chain performance? Will a more closed governancerelationship generate better chain performance?

Figure 1 shows the proposed conceptual framework for the governance structure inagri-food supply China and its antecedents and consequences.

Governance structure in agri-food supply chainWilliamson (1996) defines governance structures as the institutional matrix within whichtransactions are negotiated and executed. Hence, supply chain governance refers to theinstitutional framework in the supply chain where transactions are carried out. In order to

Figure 1.A conceptual frameworkfor governance structurein agri-food supply chain

Diversity Environmental

uncertainty

H2

H3

H4

H1

Relational Governance

Cooperative norms

Trust

Contractual Governance

Market contracts

Production contracts

Governance Mechanism

Transaction specific

asset investment

Efficiency

Flexibility

Quality

ChainPerformance

Volatility

CAER1,2

138


4/19

better understand the supply chain governance, we first need to touch upon an importanttheory: TCE. TCE is deeply rooted in two recent fields of research, new institutionaleconomics and economics of organization (Williamson, 1991, 1993a, b, 1998).

Based on Williamsons (1991) polar concept, governance structure can be viewed as

a continuum. At one extreme lies spot markets, where transactions are solelydetermined by prices, while, at the other end lies full vertical integration, where alltransactions are carried out under one ownership. In between these two extremes lievarious hybrid forms of governing economy activities, such as contracts, strategicalliances, joint ventures, etc. Different types of organizational form are differentiatedby different coordinating and control mechanisms, different type of contract laws, etc.

The most elaborated study on chain governance classification can be found byPetersonet al.(2001). In their paper, they distinguished five major categories of verticalco-ordination strategies, namely spot/cash markets, specification contracts,relation-based alliances, equity-based alliances, and vertical integration (Figure 2).As the vertical co-ordination continuum moves from the far left spot market to the far

right vertical integration, the characteristics of invisible hand co-ordination aregradually replaced by the characteristics of managed co-ordination.TCE has been widely applied in industrial marketing and management, such as

buyer-seller relationships (Cannon and Perreault, 1999; Jap and Ganesan, 2000), thechoice of organizational structure (Johnson and Houston, 2000), as well as marketingchannel integrations (Klein et al., 1990).

In recent years, TCE has been presented to agri-food markets (Sporleder, 1992;Henderson, 1994; Schulze et al., 2007), particularly in the context of supply chainmanagement (Hobbs, 1996; Hobbs and Young, 2000; Hanf and Dautzenberg, 2006;Zuniga-Arias and Ruben, 2007). According to TCE, one of the determinants ofgovernance structure is the nature and level of transaction costs that is the degree ofuncertainty, asset specificity and frequency of the transaction. It seems sensible to

suggest that simple governance structures should be used in conjunction with simple

Figure 2.The vertical coordination

continuum

Characteristics of Invisible-Hand Coordination

Self Interest

Short-term Relationship

Opportunism

Limited Information Sharing

Flexibility

Independence

Characteristics of Managed Coordination

Source:Peterson et al.(2001)

Mutual Interest

Long-term Relationship

Shared Benefits

Open Information SharingStability

Interdependence

Spot/ Cash

market

Specifications Relation-based

Alliance

Equity-based

Alliance

Vertical

Integration


139


5/19

contractual relations and complex governance structures reserved for complexrelations (Williamson, 1996). Several studies have confirmed the hypothesis thattransaction costs were a primary motivation for vertical coordination (Hobbs, 1996;Frank and Henderson, 1992).

ContractsOne important concept in governance structure and TCE is contracts. Macneil (1978,2000) classified three types of contract laws: classical contract law, neoclassicalcontract law and relational contract law. Classical contract law supports theautonomous market form of organization and is based on a set of legal rules withformal documents and self-liquidating transactions. Neoclassical contracts allowflexibility in longer-term economic relations by including additional governancestructures (e.g. arbitration). Relational contracts are agreements in principle, whichcircumscribe the contracting parties relationship, including tacit as well as explicitarrangements (Frank and Henderson, 1992). The neoclassical contract is more elasticthan classical one but more legalistic than the relational one.

In relation to Macneils three-way classification of contracts, Williamson (1996)proposes a schema which matches governance structures with commercialtransactions (Figure 3). Classical contracting applies to market governance, the mainstructure for nonspecific transaction. Neoclassical contracting applies to trilateralgovernance, where occasional transactions of the mixed and highly idiosyncratic kindstake place. Relational contracting is relevant to transaction-specific governance, wheretwo types of structures can be distinguished: bilateral governance (obligationalcontracting) and unified governance (internal organization).

Market governance with classical contracting for non-specific transactions oftenhappens in the spot market where demand and supply are determined by prices.Contractual transaction (neo-classical contracting) is defined as the occasional transactionsconductedunder written agreement between buyers and sellers with mixed or idiosyncraticspecific investments. Relational transaction (bilateral and/or unified governance) isdefined as recurrent transactions that are completed based on long-term relationshipsbetween two parties with mixed or idiosyncratic specific investments.

Figure 3.Matching governancestructures withcommercial transactions

Investment Characteristics

Source:Williamson (1996, p. 253)

Nonspecific Mixed Idiosyncratic

Trilateral Governance

(Neoclassical Contracting)

Bilateral

GovernanceMarketGovern

ance

(classicalcontracting)

Frequency

Recurrent

Occasional

(Relational Contracting)

Governance

Unified

CAER1,2

140


6/19

Therefore, contractual and relational governance are two major business relationshipgovernance forms.

In Macneils relational contracting theory, the concept of contract is expanded torefer to relationships between people who share norms and values. Trust is a key

feature in this relational governance. Relational governance mechanisms (such astrust) are regarded as a means to enhance TSI associated with less monitoring andbargaining (Barney and Hansem, 1994).

TrustMost studies define trust as the extent to which a firm believes that its exchangepartners is honest and or benevolent (Anderson and Narus, 1990). Honest refers to achannel members belief that ones partner is reliable, stands by its word, fulfilspromised role obligations and is sincere. Benevolence is defined as the belief that onespartner is genuinely interested in ones interests or welfare and is motivated to seek

joint gains (Geyskens et al., 1998).

Based on the degree of trust, Barney and Hansem (1994) identified three types oftrust in economic exchanges: weak form trust, semi-strong form trust, and strong formtrust. Williamson (1993a, b) distinguished another three types of trust according to theobjects: calculative trust, personal trust, and institutional (or hyphenated) trust.

A series of research has identified several antecedents and consequences of trusts.Anderson and Narus (1990) identified and tested three antecedents (cooperation,communication and economic outcomes given comparison levels) and twoconsequences (conflict and satisfaction) for trusts. Fritz and Fischer (2007) observedthat trust is positively affected by quality communication and positive collaborationexperience in the past. Luet al.(2007a) developed a conceptual model on small holderspersonal relationships and their market behaviour. They observed that trustedbuyer-seller relationship enhanced farmers participation in modern market outlet

(export and supermarket) as well as increased the contracts application.In their meta-analysis, Geyskenset al.(1998) examined 24 studies on trusts and the

antecedents and consequences of trust in marketing channels. Based on over 60constructs as antecedents and consequences of trust from the articles reviewed, theydeveloped and tested a causal model in which trust played a mediating role between itsfive antecedents (environmental uncertainty, own dependence, partners coercivepower use, communication, economic outcomes) and two consequences (satisfaction,long-term orientation). They also identified that the top three constructs mostly relatedto trust were sentiments (goal compatibility, fairness); actions (communication,opportunistic behaviour and support), and performance (economic outcome).

Although benevolence and honest are conceptually distinct, most trust studiesincluded one or both aspects of trust in a single, one-dimensional measurement (Jap,

2001; Claro etal.,2003;Lu etal., 2007b). Only limited studies (Ganesan, 1994; Kumar etal.,1995; Kemp and Ghauri, 2001) successfully developed a multidimensional construct fortrust and measured it for its two facts: credibility and benevolence. The questionwhether researchers need to measure the two facets of trust remains unanswered.

Two dimensional approachesGovernance structure, by its very nature, is difficult to measure and requires theconstructs of proxy variables, or scale development. Based on the above literature review,


141


7/19

we propose to study the supply chain governance from two dimensions: contractualgovernance and relational governance (Figure 4). We define that contractual governancerefers to any agreements (both written and oral) reached by parties to reduce risk anduncertainty in exchange relationships. Considering the reality in China, we specify two

types of contracts, that are marketing contracts and production contracts. Marketingcontracts define buying and selling conditions for the products while production contractsdescribe more details for the production process. Relational governance refers to partiesinformal embedded relationships and social norms. We approach the relationalgovernance from two facets: trust and cooperative norms. Empirical research shows thatrelational governance is associated with trust (Gulati, 1995; Zaheer and Venkatraman,1995; Dyer and Singh, 1998). Cooperative norms are the shared belief and expectation oftwo parties that they must work together to achieve mutual goals (Baker et al., 1999;Cannon and Perreault, 1999). Cai and Yang (2008) identified key factors which haveimpacts on cooperative norms, as well as the influences of these norms on businessperformance in a Chinese context. Contractual governance stands for the hard,explicit andformal sides of their relationships, while relational governance suggests the other side of

soft, tacit and informal.

HypothesisContractual governance vs relational governanceResearchers have been studying the relationships between contractual and relationalgovernance (Yuet al., 2006). Fergusonet al. (2005) observed that relational governancewas the predominant governance mechanism associated with exchange performance.Contractual governance was also positively associated, but to a much lesser extent.There are compelling arguments for a substitutive relationship between these twogovernance mechanisms (Dyer and Singh, 1998; Gulati, 1995). Gulati (1995) evenclaimed that Cautious contracting gives way to looser practices as partner firms build

confidence in each other. Yu et al. (2006) found that both formal governance(contractual agreements and financial commitments) and relational governance (trust)mechanisms affects suppliers tendencies to make specialized investments. Theyargued that, as firms built up more calculative trust, their partners reduced thedependence on formal governance mechanisms. However, the empirical study fromPoppo and Zenger (2002) supported the proposition that formal contracts and relationalgovernance function as complements. These two may coexist and interact with eachother. In their China chain study, Lu et al. (2007a, b) confirmed that a positiverelationship exist between trust and contractual governance. We believe that relationalgovernance becomes a necessary complement to contracts when change and conflictarise (Macneil, 1978). In particular, in the Asian culture, social norms and values are

Figure 4.2D approach togovernance structure inagri-food supply chain

Governance Structure

Contractual Governance

Market contracts

Production contracts

Relational Governance

Cooperative norms

Trust

CAER1,2

142


8/19

sometime functioning as tacit agreement and binding peoples behaviour. In the eyes ofcertain group of Chinese, contracts are a piece of paper and do not have any use ifpartners do not trust each other. Thus, we hypothesize in the content of Asian culture:

H1. There is a positive relationship between contractual governance andrelational governance.

Environmental factors vs governance structureWe limit our environmental factors to the market environment, composed of direct andpotential competitors, market regulating agencies, and so on. By definition, we treat themacro environment, such as social and political impact, as a given context. Externalenvironmental factors play a significant role in decision-making uncertainty inmarketing channel relationships (Achrol and Stern, 1988). In a highly instableenvironment, buyers and sellers may seek to establish certain governance structure inorder to manage this turbulent situation better. Geyskens et al. (1998) groupedenvironmental uncertainty as environmental diversity (the degree of heterogeneous

and complex of environmental elements), environmental volatility (referring to therapid changes of market and demand), and environmental munificence (the richavailability of resources. Based on reviewing the work of Claro et al., 2003; Cannon andPerreault, 1999; Ganesan, 1994; Kleinet al., 1990), as well as the actual situation in theagribusiness in China, we formulated two dimensions to study environmentaluncertainty: diversity and volatility.

Achrol et al. (1983) argued that cooperation and coordination will increase in ahighly uncertain input/output or competitive sector as marketing channel dyads tendto protect themselves by being better organized. In a high degree of marketuncertainty, buyers and sellers are trying to work together during the difficulty times,such as using contracts to safeguard their business and minimize the impacts of theturbulence from the markets. Thus, we hypothesize a positive relationship between theenvironmental uncertainty and contractual governance.

Geyskens et al. (1998) and Kumar et al. (1995) observed that environmentaluncertainty is inversely related to relationship quality and trust. Ganesan (1994) arguedthat in a severe uncertain environment, channel partners tend to remain flexible anddevelop temporary relationships and thus exhibits lower trust. However, these studieswere based on large companies in western culture, where business relationships weremore rooted in the formal, explicit aspects. In the Chinese content, we expect that ourtarget groups, small scale farmers, embrace much more to personal relationship in theuncertainty environments in order to secure their markets. Thus, following our H1 inwhich a positive relationship between contractual and relational governance isproposed, we also expect a positive impact of environmental uncertain on relational

governance as well. Thus, we can formulate following hypotheses:H2a. The greater the perceived environmental uncertainty, the greater the use of

contractual governance.

H2b. The greater the perceived environmental uncertainty, the greater the use ofrelational governance.

H2c. The greater the perceived environmental uncertainty, the greater the use ofboth contractual and relational governance.


143


9/19

Transaction specific investment vs governance structureTSI is one of the critical elements in the buyer-seller relationship and refers to thesellers perception of the extent to which an investment was made specifically forthe transaction with the selected buyer (Claro, 2004; Lu, 2007a, b). TSI focuses on the

accumulation of assets that are difficult and costly to shift from one transitionalpartner to another, thus asset specificity arises. Asset specificity refers to durableinvestments that are undertaken in support of particular transactions, theopportunistic cost of which investments is much lower in best alternative uses(Williamson, 1985). Highly asset-specific investments represent costs that have little orno value outside the exchange relationship. Williamson (1985) has distinguished fivetypes of asset specificity: site specificity, physical asset specificity, human assetspecificity, dedicated assets and brand name capital. Site specificity is held in situationwhen, for instance, supplier and customer are located close to each other in order toeconomize on transport and inventory costs. The other type of asset specificity isphysical asset specificity. These are investments by a supplier in capital goods that aredone specifically for the transaction (e.g. investments in equipment, tools). Humanasset specificity refers to investments in particular knowledge that has been developedto use in specific transactions (e.g. training of sales people specifically for a certainpartner). Dedicated assets are investments in generic assets that exceed the level ofinvestments the fir ms would do if it did not engage in the specifictransaction-relationship. The last type of asset specificity is a brand name capital.Investments in a brand name capital become obsolete if the product, which the brandsname is tied to, is no longer available.

According to Claro et al. (2003), physical asset specificity can stimulate relationalgovernance. Bearing in mind variations in degrees of TSI, suppliers select governancethat minimizes transaction costs. In case assets are not specific, then marketgovernance may be sufficient to minimize the transaction costs. If the assets are to

some extent specific, relational forms of governance are appropriate. In agri-foodsupply chain production process requires investments, which are mostly sunk costs,because assets cannot be easily converted or used for other purposes, therefore theyare specific (Bijman, 2002). Therefore, in this study the choice of the governancestructure is based on one hand on the argument that the relational form of governancemechanism is more appropriate for asset specific investments, and on the other hand itis agreed upon the fact that Chinese farmers are small scale farmers. This means thatthese farmers lack finance, and therefore investments and may be inclined first tochose a suitable governance structure, accumulate sufficient capital and then to makeinvestments.

Initially, the high level of TSI was considered as having a negative impact onbuyer-seller relationship, because it would foster dependence and opportunism

(Williamson, 1985). However, later on research has found also positive impact of TSI onbuyer-seller relationship, such as enhanced coordination and cooperation betweenpartners (Dyer, 1996). Depending on investments a seller may experience moreconstant sales volume, more repeat business, a decrease in sales expenses andimproving in planning and forecasting (Lohtia and Krapfel, 1994).

The purpose of governance mechanism is to provide, at minimum costs, thecoordination, control, and trust that are necessary for chain actors to believe thatengaging in the exchange will make them better off (Williamson, 1985). From the TCE

CAER1,2

144


10/19

perspective when asset specificity is low, contractual governance is considered to be a(relatively) more efficient means of governance. When asset specificity and/oruncertainty are high, hierarchical governance is (relatively) more efficient. When, assetspecificity is semi-specific and uncertainty is low, hybrid governance (through

neoclassical contracts) is viewed as (relatively) more efficient (Dyer, 1996). Contractualarrangements provide the possibility to reduce the effects of opportunism anduncertainty. Williamson (1985) argued that in transactions with TSI, the exchangepartners need more formal management due to increased dependency of the investingpartners. When the transaction involves a high level of TSI, detailed transactionconditions should be negotiated to reduce risk and uncertainty for transaction partners.Consequently, formal contracts are applied. Therefore, we expect the positiverelationship between contractual governance and TSI. Based on theory above andrelated it to our model the following hypothesis is proposed:

H3a. The higher the level of contractual government the higher the level of TSI.

In addition to neoclassical contracts, alternative means of safeguarding hybridtransactions have been offered such as: trust, reputation, financial hostage (Dyer, 1996;Sako, 1991; Klein, 1980). Based on aforementioned arguments asset specificityincreases transaction costs because of fear of opportunism. Zaheer and Venkatraman(1995) argued that trust can be viewed as the obverse of opportunism since it reflectsone partys belief that its requirements will be fulfilled through future actionsundertaken by the other party. Such a view is in line with the theoretical reasoning inthe negotiations literature (Pruitt, 1981) as well as the transaction cost perspective inwhich trust is an important determinant of long-term hierarchy-like relationships(Williamson, 1985; Aoki, 1990; Bromiley and Cummings, 1995). Thus, one can proposethat the more transaction partners trust each other, the more these partners are likelyto invest in TSI. In the model proposed in this study, one of the major items of

relational governance is trust. Relational governance mechanisms such as trust areregarded as means to enhance TSI associated with less monitoring and bargaining(Yuet al., 2006). Therefore, the following hypothesis is proposed:

H3b. With the increase of trust (the level of relational governance) the level of TSIincreases.

Chain performance vs governance structureResearch on performance of supply chain has proven to be difficult task. Althoughvarious studies have been devoted to performance, the topic remains controversial.A large number of various performance indicators has been used to characterizesupply chains, ranging from highly qualitative indicators like customer or employeesatisfaction to quantitative indicators like return on investments. This large number of

different performance indicators, and the lack of consensus on what determinesperformance of supply chains, complicates the selection of performance measures(Aramyan et al., 2006). The debate rises from the fact that performance can be definedand evaluated in several ways, and few definitions and indicators of performance arewidely accepted (Claro, 2004). Furthermore, combining these indicators into onemeasurement system proves to be difficult.

Performance indicators are of vital importance for continuity of chains andnetworks. Insufficient scores on these performance measures might lead to continuity


145


11/19

problems in the short or long-term. To ensure continuity it is imperative to workefficiently and minimise costs chain-wide. In the long-term production andconsumption chains will have to approach the efficiency frontier in order to survive.Evaluation of an organisations performance is complicated in the presence of multiple

inputs and outputs in the system, including negative externalities. These difficultiesrequire a shift in the focus of performance evaluation and benchmarking fromcharacterising performance in terms of single measures to evaluating performance in amultidimensional systems perspective (Zhu, 2003). Furthermore, chain performance isnot just an aggregation of individual performance. The production function for asupply chain faces additional costs compared with firms. Beside costs associated withproduction, a supply chain is faced with information costs (i.e. the costs associated withinformation exchange between SC members), inventory carrying costs (i.e. the costsassociated with carrying a quantity of stored inventory; capital costs, inventory servicecosts, storage space costs and inventory risk costs), physical flow costs (i.e. the costs ofdistribution), and transaction costs (i.e. the costs associated with transactions between

SC members) (LaLonde and Pohlen, 1996). These costs have both fixed and variablecharacteristics and should be taken into account in measuring performance.

There is less agreement, on the matter of what performance measurement systemshould look like. According to Bunte et al.(1998) performance indicators should relateto both effectiveness (to what extent is output standards met) and efficiency of thesupply chain and its actors (input-output ratio compared to a target). Van der Vorst(2000) makes a slightly different distinction: utilisation (actual input/norm input),productivity (actual output/actual input), and effectiveness (actual output/normoutput). Beamon (1999) suggests a system of three dimensions: resources (i.e. efficiencyof operations), output (i.e. high level of customer service) and flexibility (i.e. ability torespond to a changing environment).

Available literature identifies a number of performance measures as important inthe evaluation of supply chain performance. The most commonly used measures canbe grouped as following: efficiency, flexibility and responsiveness. Aramyan et al.(2007) summarised performance indicators used in literature and proposed thefollowing categories of performance indicators applicable for agri-food supply chains:efficiency, flexibility, responsiveness and food quality. Efficiency measures how wellthe resources are utilized and includes several measures such as production costs,profit/profitability, return on investment and inventory. Flexibility indicates the degreeto which the supply chain can respond to a changing environment and extraordinarycustomer service requests. It may include customer satisfaction, volume flexibility,delivery flexibility, reduction in the number of backorders and lost sales.Responsiveness aims at providing the requested products with a short lead time.

It may include fill rate, product lateness, customer response time, lead time, shippingerrors, and customer complaints. The specific characteristics of agri-food supplychains are captured in the measurement framework in the category food quality.

Lu (2007a, b) has proposed a model to analyse governance mechanisms that supportmarket performance in Chinese vegetable supply chains. In his model, Lu used threeperformance indicators, which are efficiency, quality/price satisfaction, andprofitability. Han et al. (2006) conducted a study which explored the links betweenvertical integration, quality management and firm performance within the framework

CAER1,2

146


12/19

of transaction cost analysis using data from Chinese pork industry. As performanceindicators authors used growth rate, market share, profitability and productivity.

Claroet al.(2003) built an integrated framework for Dutch potted plants and flowerproduction that aimed at the combination of constructs on the transaction, dyadic and

business environment level for testing their impact on relational governanceand performance. As performance indicators the sales growth rate, profitability andthe perceived satisfaction have been used. The impact of flexibility on two financialperformance indicators has been assessed.

Combining the aforementioned works and taking into account that our case is supplychain in agri-food in China, the following set of performance indicators are proposed:

. Efficiency. Final product price, profitability (value added), sales growth.

. Flexibility. Volume flexibility, delivery flexibility.

. Quality. Customer satisfaction with product quality.

Formal contracts are mechanisms that attempt to mitigate risk and uncertainty in

exchange relationships (Lusch and Brown, 1996). However, strict adherence to thewritten contract may disturb the necessary flexibility in transactional exchangeFerguson et al. (2005). Exchange performance can suffer when detailed contractsare used without a well developed social relationship (Cannon et al., 2000), and maycreate opposing conflicts that could eventually harm channel member flexibility, thusperformance (Lusch and Brown, 1996). When social relationship are well developedand partners trust each other, a higher level of flexibility and tolerance is found than inrelationship with lower trust (Morgan and Hunt, 1994). Consequently, the buyers thattrust their partners will be more willing to react flexible to changing environment ordemands of the partner (Claro, 2004). Based on this we hypothesize:

H4a. The higher the level of trust between small scale farmers and their buyers, the

higher the level of flexibility.According to Macneil (1981) formal contracts represent promises and obligations toperform particular action in the future. Contracts may specify the quality obligations ofthe products as well (e.g. compliance with certain standards, monitoring, penalties).Therefore, with contractual governance, transaction partners could be highlymotivated to comply with the quality arrangements specified in the contracts, sincein case of not complying with these arrangements may result in terminating thecontract and losing a transaction partner.

According to Ganesan (1994) trusting partners have strong desire to continue therelationship. However, the duration of the relationship is related to the fulfilments ofmutual requirements regarding quality arrangements (Lu, 2007a, b). Not compliance

with the requirements will harm trust and future relationship. Based on abovementioned driving forces, the following hypothesis is proposed:

H4b. The higher the level of contractual governance the higher the level of productquality due to high compliance with quality requirements.

H4c. The higher the level of trust the higher the level product quality.

Trust can reduce negotiation costs. Negotiations are less costly under conditions ofhigh inter-organizational trust, because agreements are reached more quickly and


147


13/19

easily as trust mitigates the information asymmetries by allowing more open andhonest sharing of information (Zaheer and Venkatraman, 1995), therefore the higherthe trust the lower the negotiation costs. Zaheer and Venkatraman (1995), proposedthat exchange performance (i.e. suppliers fulfilment of buyers requirements in terms

of price, delivery time, quality and flexibility) is lowered when negotiation costs arehigh due to the time and energy spent for negotiations. Consequently, when there istrust between partners and negotiation costs are low, performance will tend to increase.According to Rotter (1967):

[. . .] One of the most salient factors in the effectiveness of our present complex socialorganization is the willingness of one or more individuals in a social unit to trust others.The efficiency, adjustment, and even survival of any social group depend upon the presenceor absence of such trust.

Morgan and Hunt (1994) listed arguments why trust enhances efficiency, productivity,and effectiveness. These arguments are:

. transaction partners work at preserve relationship by cooperating with

transaction partners;. resist attractive short-term alternatives in favour of expected long-term benefits

of staying with current partners; and

. view potentially high-risk actions as being prudent, because of the belief thattheir partners will not act opportunistically.

Besides, according to Sako (1992) trust contributes towards enhancing efficiency,because:

. it stimulates the flow of truthful information which might otherwise be distortedby opportunistic behaviour, which in its turn may improve efficiency;

. monitoring costs are low because trust enables abolishing the quality inspectionon delivery, so costs of enforcement ensures that promises are fulfilled withoutactual use of external sanctions; and

. costs of quantity and price negotiations are low because of mutual opendisclosure of information concerning future business plans and costs.

Based on aforementioned literature review the following hypothesis is proposed:

H4d. The higher the level of trust the higher the level of efficiency.

ConclusionWhen reviewing the relevant literature on agri-food supply chain in developingcountries, one central policy question is how to integrate small scale farmers in the

supply chain. The majority of the articles addressing this topic focus on CF whilelimited research touches upon the issues of trust and relations. However, a combinationof both contracting and relationships are seldom addressed.

Based on the TCE theory and relational theory, we developed a conceptualframework for the choice of governance mechanism in the Chinese agribusinesscontext where small scale farmers are prevailing. The governance mechanism isconceptualized from both contractual as well as relational aspects. A series ofhypotheses is developed for the quality of relationships between chain governance

CAER1,2

148


14/19

and its antecedents, environmental uncertainty, as well as its consequences,chain performance.

Future research is needed to empirically verify this model. Both qualitative andquantitative approaches could be applied. Based on available literature, a set of

measurements could be developed for each concept in order to test the proposedhypothesis. Because these concepts are based on the combination of managerialconstructs, we consider the application of structural equation modelling and pathanalysis to be useful methods.

References

Achrol, R.S. and Stern, L.W. (1988), Environmental determinants of decision-makinguncertainty in marketing channels,Journal of Marketing Research, Vol. 25 No. 1,pp. 36-50.

Achrol, R.S., Reve, T. and Stern, L.W. (1983), The environment of marketing channel dyads:a framework for comparative analysis, Journal of Marketing, Vol. 47 No. 4, pp. 55-67.

Anderson, J.C. and Narus, J.A. (1990), A model of distributor firm and manufacturer firmworking partnerships, Journal of Marketing, Vol. 54 No. 1, pp. 42-58.

Aoki, M. (1990), The participatory generation of information rents and the theory of the firm,in Aoki, M., Gustafsson, B. and Williamson, O.E. (Eds), The Firm as a Nexus of Treaties,Sage, London, pp. 26-52.

Aramyan, L.H., Ondersteijn, C., van Kooten, O. and Oude Lansink, A. (2006), Performanceindicators in agri-food production chains, in Ondersteijn, C.J., Wijnands, J.H., Huirne, R.B.and van Kooten, O. (Eds), Quantifying the Agri-food Supply Chain, Springer, Dordrecht.

Aramyan, L.H., Oude Lansink, A., van der Vorst, J. and van Kooten, O. (2007), Performancemeasurement in agri-food supply chains: an case study, Supply Chain Management:

An International Journal, Vol. 12 No. 4, pp. 304-15.

Baker, T.L., Simpson, P.M. and Siguaw, J.A. (1999), The impact of suppliers perceptions of

reseller market orientation on key relationship constructs, Academy of Market ScienceJournal, Nos 27/1, pp. 50-7.

Barney, J.B. and Hansem, M.H. (1994), Trustworthiness as a source of competitive advantage,Strategic Management Journal, Vol. 15, pp. 175-90, Special Issue: CompetitiveOrganizational Behavior.

Beamon, B.M. (1999), Measuring supply chain performance, International Journal ofOperations & Production Management, Vol. 19 No. 3, pp. 275-92.

Bijman, J. (2002), Essays on agricultural co-operatives. Governance structure in fruit andvegetable chains, PhD thesis, Erasmus University, Rotterdam.

Bromiley, P. and Cummings, L. (1995), Transaction costs in organizations with trust, in Bies, R.,Sheppard, B. and Lewicki, R. (Eds),Research 012 Negotiation in Organizations, JAI Press,Greenwich, CT.

Bunte, F., Mulder, M., van Tongeren, F. and de Vlieger, K. (1998), Meting van de performancevan agrarische productiekolommen, LEI-onderzoeksverslag (research report by the DutchAgricultural Economics Institute), The Hague.

Cai, S.H. and Yang, Z.L. (2008), Development of cooperative norms in the buyer-supplierrelationship: the Chinese experience, Journal of Supply Chain Management, Vol. 44 No. 1,pp. 55-70.

Cannon, J.P. and Perreault, W.D. Jr (1999), Buyer-seller relationships in business markets,Journal of Marketing Research, Vol. 36 No. 4, pp. 439-60.


149


15/19

Cannon, J.P., Achrol, R.S. and Gundlach, G.T. (2000), Contracts, norms, plural form governance,

Journal of the Academy of Marketing Science, Vol. 28 No. 2, pp. 180-94.

Claro, D.P. (2004), Managing business networks and buyers-suppliers relationship, PhD thesis,Wageningen University, Wageningen.

Claro, D.P., Hagelaar, G. and Omta, O. (2003), The determinants of relational governance andperformance: how to manage business relationships?, Industrial Marketing Management,Vol. 32, pp. 703-16.

Demsetz, H. (1988), The theory of the firm revisited, Journal of Law, Economics, andOrganization, Vol. 4 No. 1, pp. 141-61.

Dyer, J.H. (1996), Specialized supplier networks as a source of competitive advantage: evidencefrom the auto industry, Strategic Management Journal, Vol. 17, pp. 271-91.

Dyer, J.H. and Singh, H. (1998), The relational view: cooperative strategy and sources ofinterorganizational competitive advantage,The Academy of Management Review, Vol. 23No. 4, pp. 660-79.

Ferguson, R.J., Paulin, M. and Bergeron, J. (2005), Contractual governance, relational

governance, and the performance of interfirm service exchanges: the influence ofboundary-spanner closeness,Journal of the Academy of Marketing Science, Vol. 33 No. 2,pp. 217-34.

Frank, S. and Henderson, D. (1992), Transaction costs as determinants of vertical coordinationin the U.S. food industries, American Journal of Agricultural Economics, Vol. 74 No. 4,pp. 941-50.

Fritz, M. and Fischer, C. (2007), The role of trust in European food chains theory and empirical

findings, paper presented at the 17th Annual World Food and Agribusiness Forum andSymposium, Parma, 23-26 June.

Ganesan, S. (1994), Determinants of long-term orientation in buyer-seller relationships,Journal of Marketing, Vol. 58 No. 2, pp. 1-19.

Geyskens, I., Steenkamp, J.B.E.M. and Kumar, N. (1998), Generalizations about trustin marketing channel relationships using meta-analysis, International Journal of Researchin Marketing, Vol. 15, pp. 223-48.

Glover, D.J. (1987), Increasing the benefits to smallholders from contract farming: problems forfarmers organization and policy makers,World Development, Vol. 15 No. 4, pp. 441-8.

Gulati, R. (1995), Does familiarity breed trust? The implications of repeated ties for contractualchoice in alliances, The Academy of Management Journal, Vol. 38 No. 1, pp. 85-112.

Han, J., Trienekens, J.H., Tan, T., Omta, S.W.F. and Wang, K. (2006), Vertical coordination,quality management and firm performance of the pork processing industry in China,in Bijman, J., Omta, S.W.F., Trienekens, J.H., Wijnands, J.H.M. and Wubben, E.F.M. (Eds),

Internatinal Agri-food Chains and Networks: Management and Organization, WageningenAcademic Publishers, Wageningen.

Hanf, J. and Dautzenberg, K. (2006), A theoretical framework of chain management, Journal onChain and Network Science, Vol. 6 No. 2, pp. 79-94.

Henderson, D.R. (1994), Measuring and assessing vertical ties in the agro-food system,Canadian Journal of Agricultural Economics, Vol. 42 No. 4, pp. 549-60.

Hernandez, R., Reardon, T. and Berdegue, J. (2007), Supermarkets, wholesalers, and tomatogrowers in Guatemala,Agricultural Economics, Vol. 36, pp. 281-90.

Hobbs, J.E. (1996), A transaction cost approach to supply chain management, Supply ChainManagement, Vol. 1 No. 2, pp. 15-27.

CAER1,2

150


16/19

Hobbs, J.E. and Young, Y.M. (2000), Closer vertical co-ordination in agri-food supply chains:a conceptual framework and some preliminary evidence, Supply Chain Management,Vol. 5 No. 3, pp. 131-42.

Huang, J.K., Wu, Y.H. and Rozelle, S. (2007a),Marketing Chinas Fruit: Are Small, Poor Farmers

Beling Excluded from the Supply Chain?, Center for Chinese Agricultural Policy, ChineseAcademy of Sciences, Beijing.

Huang, J.K., Huang, Z.R., Zhi, H.Y., Wu, Y.H., Niu, X.F. and Rozelle, S. (2007b), Production,marketing and impacts of market chain changes on farmers in China: case study ofcucumber and tomato in Shandong province, Micro study report of Component 1 (China),Regoverning Market Program. Center for Chinese Agricultural Policy, Chinese Academyof Sciences, Beijing.

Hu, D.H., Reardon, T., Rozelle, S., Timmer, P. and Wang, H.L. (2004), The emergence ofsupermarkets with Chinese characteristics: challenges and opportunities for Chinasagricultural development, Development Policy Review, Vol. 22 No. 5, pp. 557-86.

Jap, S.D. (2001), Perspectives on joint competitive advantages in buyer-supplier relationships,International Journal of Research in Marketing, Vol. 18, pp. 19-35.

Jap, S.D. and Ganesan, S. (2000), Control mechanisms and the relationship life cycle:implications for safeguarding specific investment and development commitment,

Journal of Marketing Research, Vol. 37 No. 2, pp. 227-45.

Johnson, S.A. and Houston, M.B. (2000), Buyer-supplier contracts versus joint venturesdeterminants and consequences of transaction structure, Journal of marketing research,Vol. 37 No. 1, pp. 1-15.

Kemp, R.G.M. and Ghauri, O.N. (2001), Interdependency in joint ventures: the relationshipbetween dependence asymmetry and performance, Journal on Chain and NetworkScience, Vol. 1 No. 2, pp. 101-10.

Key, N. and Runsten, D. (1999), Contract farming, smallholders, and rural development in LatinAmerica: the organization of agroprocessing firms and the scale of outgrower production,World Development, Vol. 27 No. 2, pp. 381-401.

Klein, B. (1980), Transaction cost determinants of unfair contractual arrangements,AmericanEconomic Review, Vol. 70 No. 2, pp. 56-62.

Klein, S., Frazier, G.L. and Roth, V.J. (1990), A transaction cost analysis model of channelintegration in international markets, Journal of Marketing Research, Vol. 27 No. 2,pp. 196-208.

Kumar, N., Scheer, L.K. and Steenkamp, J.B.E.M. (1995), The effects of supplier fairness onvulnerable resellers, Journal of Marketing Research, Vol. 32 No. 1, pp. 54-65.

LaLonde, B.J. and Pohlen, T.L. (1996), Issues in supply chain costing, International Journal ofLogistics Management, Vol. 7 No. 1, pp. 1-12.

Lohtia, R. and Krapfel, R. (1994), The impact of transaction specific investments on buyer-sellerrelationships, Journal of Business & Industrial Marketing, Vol. 9 No. 1, pp. 6-16.

Lu, H. (2007a), The Role of Guanxi in Buyer-seller Relationships in China: A Survey of VegetableSupply Chains in Jiangsu Province, International Chains and Networks Series, Vol. 1,Wageningen Academic Publishers, Wageningen.

Lu, H. (2007b), The role of guanxi in buyer-seller relationships in China. A survey of vegetablesupply chains in Jiangsu Province, PhD thesis, Wageningen University, Wageningen.

Lu, H., Trienekens, J. and Omta, O. (2007a), Does traditionalGuanximatter for smallholders inmodern markets? A structural equation modeling, paper presented at the 17th AnnualWorld Food and Agribusiness Forum and Symposium, Parma, 23-36 June.


151


17/19

Lu, H., Trieneken, J., Omta, O. and Feng, S. (2007b), The role of Guanxi networks and contracts

in Chinese,Journal on Chain and Network Science, Vol. 7 No. 2, pp. 121-31.

Lusch, R.F. and Brown, J.R. (1996), Interdependency, contracting, and relational behavior in

marketing channels, Journal of Marketing, Vol. 60, pp. 19-38.

Macneil, I.R. (1978), Contracts: adjustment of long-term economic relations under classical,

neoclassical, and relational contract law, Northwestern University Law Review, Vol. 72No. 6, pp. 854-905.

Macneil, I.R. (1981), Economic analysis of contractual relations: its shortfalls and need for

rich classificatory apparatus, Northwestern University Law Review, Vol. 75 No. 1,pp. 1018-63.

Macneil, I.R. (2000), Relational contract theory: challenges and queries, NorthwesternUniversity Law Review, Vol. 94 No. 3, pp. 877-907.

Morgan, R.M. and Hunt, S.D. (1994), The commitment-trust theory of relationship marketing,

Journal of Marketing, Vol. 58, pp. 20-38.

Peterson, H.C., Wysocki, A. and Harsh, S.B. (2001), Strategic choice along the vertical

coordination continuum, International Food and Agribusiness Management Review,Vol. 4, pp. 149-66.

Poppo, L. and Zenger, T. (2002), Do formal contracts and relational governance function as

substitutes or complements?,Strategic Management Journal, Vol. 23, pp. 707-25.

Porter, G. and Phillips-Howard, K. (1997), Comparing contracts: an evaluation of contract

farming schemes in Africa, World Development, Vol. 25 No. 2, pp. 227-38.

Pruitt, D.G. (1981), Negotiation Behavior, Academic Press, New York, NY.

Reardon, T. and Barrett, C.B. (2000), Agroindustrialization, globalization, and international

development: as overview of issues, patterns, and determinants, special issue,

Agricultural Economics, Vol. 23, pp. 195-205.

Ring, P. and van den Ven, A. (1992), Structuring cooperative relationships between

organizations, Strategic Management Journal, Vol. 13, pp. 483-98.Ring, P. and van den Ven, A. (1994), Developmental processes of cooperative interorganizational

relationships, Academy of Management Journal, Vol. 19 No. 1, pp. 90-118.

Rotter, J.B. (1967), A new scale for the measurement of interpersonal trust, Journal ofPersonality, Vol. 35 No. 4, pp. 651-65.

Sako, M. (1991), The role of trust in Japanese buyer-supplier relationships, RicercheEconomiche, Vol. XLV, pp. 449-74.

Sako, M. (1992),Prices, Quality, and Trust: Inter-firm Relations in Britain and Japan , CambridgeUniversity Press, Cambridge.

Schulze, B., Spiller, A. and Theuvsen, L. (2007), A broader view on vertical coordination: lessons

from German pork production, Journal on Chain and Network Science , Vol. 7 No. 1,

pp. 35-53.Sporleder, T.L. (1992), Managerial economics of vertically coordinated agricultural firms,

American Journal of Agricultural Economics, Vol. 74 No. 5, pp. 1226-31.

van der Vorst, J.G.A.J. (2000), Effective food supply chains. Generating, modelling and

evaluation supply chain scenarios, PhD thesis, Wageningen University, Wageningen.

Warning, M. and Key, N. (2002), The social performance and distributional consequences of

contract farming: an equilibrium analysis of the ABP program in Senegal, WorldDevelopment, Vol. 30 No. 2, pp. 255-63.

CAER1,2

152


18/19

Weatherspoon, D.D. and Reardon, T. (2003), The rise of supermarkets in Africa: implications

for agrifood systems and the rural poor, Development Policy Review, Vol. 21 No. 3,pp. 333-55.

Williams, S. and Karen, R. (1985), Agribusiness and the Small-scale Farmer: A Dynamic

Partnership for Development, Westview Press, Boulder, CO.Williamson, O.E. (1975),Markets and Hierarchies, The Free Press, New York, NY.

Williamson, O.E. (1985), The Economic Institutions of Capitalism, The Free Press,New York, NY.

Williamson, O.E. (1991), Comparative economic organization: the analysis of discrete structuralalternatives, Administrative Science Quarterly, Vol. 36 No. 2, pp. 269-96.

Williamson, O.E. (1993a), Transaction cost economics and organization theory,Industrial andCorporate Change, Vol. 2 No. 2, pp. 107-56.

Williamson, O.E. (1993b), Calculativeness, trust, and economic organization, Journal of Law &Economics, Vol. 36, pp. 487-500.

Williamson, O.E. (1996), Transaction-cost economics: the governance of contractual relations,

The Journal of Law & Economics, Vol. 22 No. 2, pp. 233-61.

Williamson, O.E. (1998), Transaction cost economics: how it works; here it is headed,De Economist, Quarterly Review of the Royal Netherlands Economic Association, Vol. 146No. 1, pp. 23-59.

Yu, C.M.J., Liao, T.J. and Lin, Z.D. (2006), Formal governance mechanisms, relationalgovernance mechanism, and transaction-specific investments in supplier-manufacturer

relationships, Industrial Marketing Management, Vol. 35, pp. 128-39.

Zaheer, A. and Venkatraman, N. (1995), Relational governance as an interorganizationalstrategy: an empirical test of the role of trust in economic exchange, Strategic

Management Journal, Vol. 16 No. 5, pp. 373-92.

Zhu, J. (2003), Quantitative Models for Performance Evaluation and Benchmarking,

Kluwer Academic Publishers, Dordrecht.Zuniga-Arias, G. and Ruben, R. (2007), Determinants of market outlet choice for mango

producers in Costa Rica, in Ruben, R., van Boeker, T., van Tilburg, A. and Trienekens, J.(Eds),Tropical Food Chains: Governance Regiomes for Quality Management, WageningenAcademic Publishers, Wageningen, pp. 49-67.

Further reading

Allen, D. and Lueck, D. (1992), Contract choice in modern agriculture: cash rent versuscropshare, Journal of Law & Economics, Vol. 35 No. 2, pp. 397-426.

Gibbs, J.P. (1981),Norms,Deviance, and Social Control: Conceptual Matters, Elsevier, NewYork, NY.

Han, J., Omta, S.W.F. and Trienekens, J.H. (2007), The Joint Impact of Supply Chain Integrationand Quality Management on the Performance of Pork Processing Firms in China, IAMA orIFAMA, Carefree, AZ.

Masakure, O. and Henson, S. (2005), Why do small-scale producers choose to produce undercontract? Lessons from nontraditional vegetable exports from Zimbabwe, World

Development, Vol. 33 No. 10, pp. 1721-33.

North, D.C. (1990), Institutions, Institutional Change and Economic Performance, CambridgeUniversity Press, Cambridge.


153


19/19

Perry, M.K. (1989), Vertical integration: determinants and effects, in Schmalensee, R. andWillig, R.D. (Eds), The Handbook of Industrial Organisation, Vol. 1, North-Holland,Amsterdam.

Sartorius, K. and Kirsten, J. (2007), A framework to facilitate institutional arrangements for

smallholder supply in developing countries: an agribusiness perspective, Food Policy,Vol. 32, pp. 640-55.

Saxton, T. (1997), The effects of partner and relationship characteristics on alliance outcomes,Academy of Management Journal, Vol. 40, pp. 443-61.

Schulze, B., Wocken, C. and Spiller, A. (2006), Relationship quality in agri-food chain: suppliermanagement in the German pork and dairy sector,Journal on Chain and Network Science,Vol. 6 No. 1, pp. 55-68.

About the authorsXiaoyong Zhang received her MSc degree in agricultural economics and PhD degree inagricultural marketing and consumer behaviour at Wageningen University in 1999. Since then,she has been working at Agricultural Economics Research Institute (LEI) in The Netherlands.

Her research interest lies in marketing research, consumer behaviour and chain governance.She is a research fellow at Mansholt Graduate School. Xiaoyong Zhang is the correspondingauthor and can be contacted at: [email protected]

Lusine H. Aramyan obtained her MSc degree in Agricultural Economics and her PhD degreein Measuring Supply Chain Performance in Agri-food Sector at Wageningen university, in 2007.Since then she has been appointed by the Agricultural Economics Research Institute (LEI),The Netherlands, as researcher with a focus on agricultural and food policy issues. Her researchinterests are in performance measurements, food supply chains, efficiency analysis and qualityassurance systems.

CAER1,2

154

To purchase reprints of this article please e-mail: [email protected] visit our web site for further details: www.emeraldinsight.com/reprints

a conceptual framework for supply chain_ an application to agri-food chains in chinagovernance

Documents